Tuesday, September 10, 2013

French growth still lagging; is economic improvement on the way?

France is having a difficult time generating economic growth. While PMI indicators show signs of stabilization, economic data in general has not been great Consider the unemployment rate for example. Even Italy, who has undergone a severe recession and some political turmoil (see post), is showing some slight improvement.

French unemployment on the other hand is trending in the wrong direction. August data will of course provide further insight.

Today the INSEE reported that industrial production for July declined quite sharply, which came as a complete surprise to economists who track the euro area progress.

Source: Econoday

Just to put things in perspective, Germany saw its industrial production rise by 2.4% over the same period. The French factory output growth moving into the red is particularly disappointing, given the recent upward momentum.

Source: INSEE

There is some hope however that this weakness may be transient. French large cap equities (CAC40) have been outperforming other European shares (Euro STOXX 50) starting earlier this year. Is the market signaling better days ahead for the French economy? We should know more by the end of the month, as a number of key economic indicators (French manufacturing PMI, business confidence, consumption, etc.) will provide better guidance.